Dutch energy policy

Mr Redeker gave a brief overview of the Dutch energy policy, pointing out which private energy investments are necessary.

The Climate and Green Growth Ministry develops policy on the energy system to get it sustainable, reliable and affordable. Until 2050 this policy is reviewed every 5 years.

Mr Redeker mentioned that there are two key issues in the current policy making:

• Net congestion
• Net tarriffis: afforability and competition position

The Ministry sets the market order in which the role of private investors is important. Examples are investments into C02 capture and battery technology. InvestNL is the body that bridges the governmental policy and private investors.

EU Energy Policy Under the Scrutiny of Engineers

Prof. Furfari described the EU energy policy from the perspective of engineers. He wanted to show a realistic picture of international energy demand and sources. This is important for institutional investors who invest in the energy transition. Is their investment policy alligned with reality?

Oil, coal and gas in demand

Poor countries still use muscular energy. They need other energy sources to get to our life standard. In other parts of the world there’s huge demand of energy. All energy forms are necessary. Coal and oil are growing. Gas demand has grown 4 times as much since the 1960s. Wind and solar energy are growing as well.

Europe is stagnating, displacing economic activities to elsewhere in the world where energy is cheaper, such as Asia, which is growing.

Oil versus wind and solar energy

Oil is the most important of the energy sources, producing more than 33% of all energy. Wind and solar produce only 3% of all energy, and they don’t produce consistently. It changes. Prof. Furfari mentioned Italy as an example, where there are long periods without wind, so backup energy is necessary, which is produced by gas power plants and nuclear reactors. In fact, 77% of the time backup energy is required for wind energy, and a staggering 89% of the time backup energy is required for solar energy.

Wind turbines and solar panels cannot be produced without fossil fuels. Steel, plastic and aluminium are used. China produces wind turbines and solar panels thanks to coal energy.

Wind and solar energy are not to save the climate. That’s an illusion. The gap between green energy and fossil fuels is increasing. Seas are split among countries to explore energy resources. To produce more oil and gas.

More fossil fuels

New technology is invented to produce more oil in the world. In the US there’s a shale gas industry. This is the real energy transition. In Europe shale gas is prohibited.

China increases coal energy. India wants to be energy independent and uses coal. India will emit more C02 by the year 2050 than Europe has done 20 years ago.

The Netherlands contributes just 0.04% of the global C02 emissions yet it focusses on renewable energy that’s not energy efficient and hardly contributes positively to climate change. A more realistic view of energy demand and technoloy is of the essence. This applies to pension funds investing in the energy transition as well.

Dutch energy policy in reality

Energy expert Remco deBoer discussed the effectiveness of the Dutch energy policy.

He commented on the Dutch energy policy. This policy is unsustainable, he said, and is not conducive to battle climate change.

The current problem of net congestion has been known by Parliament since 2019. It is not a natural phenomenon but a direct consequence of the focus on sustainability in the energy policy in stead of reliability and affordability.

There is less appetite to invest in wind energy from sea, as the costs to get the wind energy to land have risen from 50 to 90 billion euros. Green hydrogen is an illusion, as it’s 8 times more expensive than grey hydrogen.

The European Commission aims to net zero emissions by 2050, with a target in 2040 of having reached -90%. The policy of the Netherlands is to have reached net zero by 2035. China’s goal is to be net zero by 2060, and India in 2070. Europe produces 6% of the global C02 emissions. Its influence to stop climate change, is very limited. And the costs are high.

To be able to meet the 2035 goal of net zero, investments are necessary, and so investments in for example defence have been lagging for years, focussing on renewable energy instead. In addition, the Netherlands exports C02 emissions to China, such as refineries or the processing of raw materials. This amounts to 1,300 billion euros per year.

The Dutch energy policy leads to company closures and increasing costs of energy. Reliable energy is of the essence and that’s why fossil fuels exploration needs to return. The Netherands imports shale gas from the US. Gas that can be found in Europe.

The Netherlands should formulate different goals. Not just climate. You cannot save and the climate, and invest in defence, and help poor countries all at the same time. It’s essential to have a debate on a realistic energy policy.

Re-perceiving Energy Transitions

Mr Bentham is the former head of Shell’s scenario department. He described different scenarios as a means to think about the energy transition.  This method requires brutal honesty at the situation, to think in upsides and downsides, and still be wise.

Deep electrification brings issues. Energy dense fossil fuels are needed, and fasing them out, is difficult. This begs the question whether net zero is realistic in 2050, or is there a better scenario?

EU sustainability legislation in the chains of finance and energy

Prof. Raas discussed the applicable EU laws on institutional investors wishing to invest in the energy transition.

EU climate goals were formulated in 2015. Among other things, the share of renewable energy in the total mix must increase by a third. The New Green Deal also came out of this. The EU wants to combat climate change but biodiversity and circular economy are also part of this.

It costs €350 billion a year to achieve the EU climate goals. Private money still needs to be added. This can be done through coercion, such as taxes and quotas, or to stimulate behavior. This resulted in regulations covering 48,000 pages. The focus of this presentation was on finance.

• The Sustainable Finance Disclosure Regulation applies to financial institutions such as pension funds. This legislation assumes that participants care about managing sustainability risks when they are asked about it;
• The Corporate Sustainability Reporting Directive applies to companies that are required to report on their sustainability. This is a costly administrative burden for many companies;
• The comprehensive Taxonomy Regulation describes when an activity may be labeled sustainable. To become competitive, the EU came up with:
• The Omnibus proposal. If this proposal becomes law, sustainability reporting requirements will only apply to large companies and listed companies, excluding a large majority of private enterprises from this administrative burden.

Infrastructure Impact Debt

Mrs. De Ruiter explains impact investing and  presents examples of how Triodos Investment Management impact investst in European energy infrastructure projects by granting loans.

She explained that oil and gas will be needed for a long time to come but that is no reason not to do the energy transition to renewable sources. Investing in the energy transition can be done by not investing in certain companies (exclusion) and by selecting companies that present the best in their sector in terms of energy transition.

Investing in energy transition is a form of impact investing. This means that an investment yields a financial return and has a positive contribution (impact) on the world. The United Nations Sustainability Goals are part of impact investing. It's about how an investor sees the future. There are data on that and investors must report on their impact.

Infrastructure Loans (“Infrastructure Debt”) are about loans on wind and solar energy, heat grids and green hydrogen. Capital Intensive investments. These are new solutions for a new system. Whereas fossil fuel energy companies tend to be large companies, in the renewable economy it is precisely small companies with the possibility of economies of scale.

Examples of projects Triodos Investment Management has financed are:

- Giga Storage: large batteries. This involves scaling up storage capacity. Batteries containing cobalt are not financed;

- Floating solar park. Growing market.

Evolving energy transition, evolving opportunities

Mr. Demyttenaere presented how the energy transition affects public and private investments in energy.

Trends:

• There is a growing demand for energy, driven by artificial intelligence. There is a lot of growth here with data centers in particular;
• Internationally, there is a trend toward renewable energy. China produces a lot of batteries, electric vehicles and solar panels. As a result, there is pressure on profitability. Renewable energy is underperforming financially while nuclear and grid are doing better;
• Nationally, there is a trend toward energy self-sufficiency and affordability. This presents opportunities in public markets such as utilities.

Investing in nuclear energy

Kamil Sudayarov presented how nuclear energy can be invested in by pension funds and individuals through the VanEck Uranium and Nuclear Technologies UCITS Exhange Traded Fund.

Driven in part by artificial intelligence, nuclear energy is on the rise in the U.S. and in Asia. Nuclear energy is generated from uranium. An investor could invest in uranium futures. But these are not easily tradable (“not liquid”) and do not reflect the accurate spot price.

VanEck therefore created the “Uranium and Nuclear Technologies UCITS ETF.” This tracks a basket of at least 25 publicly traded stocks worldwide. The stocks are from companies that derive at least 50% of their revenue from uranium, including mining activities with a reasonable chance of extracting at least 50% uranium, and from companies that are profitable in the field of nuclear energy infrastructure.

Nuclear weapons are excluded, as are companies that are not tracked by the ISS ESG rating agency or score low on the ISS ESG rating. Thus, this Exchange Traded Fund fits within investment policy in the field of ESG (Environment, Society, Governance). Andwith this Exchange Traded Fund both pension funds and individuals can invest in part of the energy transition: nuclear power.

Nuclaer energy for sea vessels

Ms. Heerema presented how Allseas is facilitating the energy transition in practice.

Allseas is a leading contractor in the global offshore energy market, specializing in installing subsea pipelines, removing and installing ultra-heavy platforms and installing transformer stations for offshore wind energy. In addition, the company is actively collecting manganese nodules from the deep sea floor for the extraction of metals needed for the realization of the energy transition.

The maritime industry is a major emitter of C02. To reduce those emissions, alternative fuels such as methanol and ammonia are being looked at. However, for large ships operating offshore for long periods, these fuels do not offer a good solution due to their low energy densities. For those large ships, nuclear energy could be suitable.

Besides its low-carbon nature, nuclear energy has the advantage that this source lasts for years, which offers operational advantages. It is not new to use nuclear energy on seagoing vessels; there are hundreds of naval vessels running on nuclear energy and in Russia there are icebreakers that run on nuclear.

With innovation and vigor, Allseas plans to develop the first “offshore ready” SMR (small modular reactor) for energy-intensive ships.

In addition to deployment at sea, the company also foresees interest in land-based applications, for example in industrial areas and at data centers. This carbon-free energy source can not only help solve grid congestion, but also strengthen the energy autonomy of the Netherlands and Europe.

The International Maritime Organization (IMO) is revising its code on nuclear-powered ships. Components are, of course, safety, along with insurability and public opinion.

Investing opportunities in synthetic fuel

He explained how Power2X is investing in the energy transition with projects. Power2X is a consulting and development company. The Canada Pension Plan Investment Board invested 130 million euros there to enable the growth needed in the field of renewable energy development for industry. These include “clean” molecules such as green hydrogen, green methanol and ammonia.

An example of a project is E-Fuels in Rotterdam for which a plant is being built. This is for aviation fuel, replacing kerosene. The project suits pension funds in terms of investment size (greater than 100 million euros) and time frame (20 years).

Opportunities and challenges in the energy transition

To realise the energy transition scalable technologies and adapative architecture of our energy system is required. Investments into companies that manufacture and develop systems integration of high tech appliances.

Mr. Boneschanser guides start-ups in the field of energy transition through the Technical University of Eindhoven. He presented on investing in appliances as part of the energy transition, and the risks attached.

The goal of the Paris Climate Agreement is to achieve a transition to a new energy system by 2050. The direction is toward heat grids, electricity and part to molecules. This will require devices, and industry to make these devices. Industry cannot be driven away.

However, the rate of construction is low in the EU. The PFAS ban is banning some devices. The manufacturing industry for solar, wind and batteries is dominant in China. This dependence carries risks.

A battery power system can be hacked. This can cripple an entire province. This is an important risk to manage.

Ultimately, devices such as batteries have a finite life and end up in the (chemical) waste pile. There are also significant sustainability and geopolitical risks associated with the energy transition that must be managed.